Some mortgages specifically allow for the mortgage to be transferred or assumed by another person, but they are rare. In some states, if the contract doesn’t state whether or not the mortgage is assumable, then the state assumes that it is. There is also a clause in many mortgages called a “Due on Sale” clause which forces you to pay the balance in full when the home is sold to someone else. If this clause exists in the contract, it’s generally not assumable. There are exceptions to this, however. If the home is transferred to your spouse or your child, the clause doesn’t apply. Additionally, upon your death when the property is inherited by someone, the clause doesn’t apply.
Even if a mortgage is assumable, that doesn’t mean that you can transfer it to just anyone. The bank still has a right to refuse the transfer. They will check the transferee’s credit, assets, income, and other information in the same way they would if the person applied for a mortgage. If they feel the transferee has greater risk of defaulting than the original borrower, they will either refuse the transfer or change the terms of the mortgage.
Since the transferee must go through the same credit, asset, and income checks as someone applying for a mortgage and the bank is allowed to refuse the transfer or change the terms of the mortgage, there is no inherent benefit to transferring a mortgage over the transferee simply applying for a new mortgage on their own. Additionally, if the previous owner was in foreclosure or behind on mortgage payments, the transferee will be liable for making those payments and bringing the home out of foreclosure. In some cases, if a transferee stops making payments, the bank can still force the original borrower to assume the liability. If anything, transferring a mortgage is a riskier option for both the original borrower and transferee without any benefits.
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